NEW YORK (TheStreet) -- Shares of PepsiCo, Inc. (PEP) are up 2.85% to $91.71 on very heavy trading volume after the company raised its forecast for the year, saying its new Lay's potato chips, including a cappuccino variety, should help boost its profit in the months ahead, the Wall Street Journal reports.
The company, which also owns Tropicana, Gatorade and Quaker, said global volume for both its snacks and drinks was up 1% in the second quarter.
The gains were relatively modest, but PepsiCo has been driving its financial performance with a cost-cutting plan expected to generate $1 billion in savings this year, the Journal said.
For the quarter, the company said net income slipped to $1.98 billion, or $1.29 per share, down 2%t from a year ago, as restructuring and impairment charges took their toll.
Adjusted for one-time charges, earnings were $1.32 per share, beating the $1.23 analysts expected, according to Zacks Investment Research.
Revenue was $16.89 billion, matching Wall Street forecasts.
TheStreet Ratings team rates PEPSICO INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PEPSICO INC (PEP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- PEPSICO INC has improved earnings per share by 14.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PEPSICO INC increased its bottom line by earning $4.32 versus $3.92 in the prior year. This year, the market expects an improvement in earnings ($4.55 versus $4.32).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Beverages industry average. The net income increased by 13.1% when compared to the same quarter one year prior, going from $1,075.00 million to $1,216.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 0.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Beverages industry and the overall market, PEPSICO INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for PEPSICO INC is rather high; currently it is at 58.52%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.63% trails the industry average.
- You can view the full analysis from the report here: PEP Ratings Report